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News/Business. Becky Quick, Joe Kernen, Carl Quintanilla. Business news and talk as the trading day unfolds on Wall Street. (CC)

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03:00:00

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Toyota 62, Us 47, Hank Paulson 16, China 13, Steve Liesman 12, Exxon 10, Phil 10, Jim Nussle 9, U.s. 8, Paulson 8, Lehman 8, Joe 8, Carl 8, Jim Lentz 7, Washington 6, New York 6, Greece 5, S&p 5, Goldman 5, Massachusetts 5,
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  CNBC    Squawk Box    News/Business. Becky Quick, Joe Kernen, Carl Quintanilla.  
   Business news and talk as the trading day unfolds on Wall...  

    February 1, 2010
    6:00 - 9:00am EST  

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when is it a wash past you? >> talking trillions of. that would be good for us if we could do that. between that and this toyota story, a lot going on. >> you know with nussle on, you know what that means? all right. play the hustle. our other top story at 6:30 eastern, toyota will announce a fix for millions of vehicles it had to recall. the company taking out full page ads in newspapers yesterday. you might have seen them characterizing its halt in sales and production as a temporary pause to put customers first. following the announcement this morning, toyota is expected to begin repairing or replacing flawed sl ee ee eed pedals. we'll check in with our phil lebeau in the next half hour and at 7:30 eastern we'll be joined
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live by toyota usa president jim lenz. is that the way it happens with the floor mat or is it with the pedal. >> there are some people that think it's the electronic throttle. >> that's what they're saying. >> of the 11 crashes, only one of them was because of this pick it that they're talking about today. >> that doesn't help. that makes it a worse story to toyota. i can certainly see -- i have had an accelerator stick on the floor mat. if it doesn't pop out because of the spring or throttle, it's entirely different -- if i were toyota, i would like to solve the floor mat problem, too, but that it or not?
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you won't feel better about your car -- we need the truth. >> we talked about the cell phone call that we heard. there was an audiotape where it got stuck and calling for help. i wonder if that's the situation of a floor mat like this? >> is that the call where the caller was a highway patrol officer? >> no. this was not a highway patrol officer i don't think. >> there's been another one in the "times" today and the take is if a highway patrol officer can't control the car, who could? so lentz has a tough mission this morning. >> we'll be hearing from him later this morning. some other headlines this morning, london times reporting that goldman sachs may plan to pay chairman and ceo a $100 million bonus. one rival banker was quoted as saying this is lloyd thumbing his nose at obama. the chairman of the deutsche bank joseph ackermann floated
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the idea in davos last week but the proposal failed to gain support to push things through but if you thought the bonus story was going away, think again. >> i assume that was the dominant story in davos you would say, the mood among bankers? >> there were some bankers who were missing. lloyd was not there. jamie dimon was not there as we have seen in year's past. the bankers kept a much lower profile than in year's past probably because of this exact reason. >> january situation trading down for the month, the day, the week last week. >> time to roll out the es browning bull look long in the tooth story and see one in "the wall street journal" after 64% run-up biggest gains are likely passed. we had this story after all of the way up to 60% unrun-up.
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>> do you see a huge buying spree in the future? >> how do you know? >> he's just pointing to some of the things in the market. >> it's the same piece he's written -- does he get assigned that? does a journal editor? >> he writes what he wants. >> any way. when you go five normally the average is that you go nine. five down. maybe you go nine. and that doesn't mean the bull market -- i would defer to bernie before i would defer to same people browning cited in every past article about how we are due. >> if he's saying you go down nine, that's a 3% drop before things turn around. >> it will be today. >> not likely. >> gdp number on friday didn't help us out. we thought for a while it might when we got friday morning.
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>> roll out the same piece every time. i would keep it in my word whatever it is. >> you never repeat yourself. >> you have to defend browning today? >> futures are positive this morning as you can see. we'll see what happens. there's some concerns about greece and china that did weigh on asia and europe overnight. oil trading up a couple dimes or so. 24 cents at last check to 73.14. ten-year note yielding 3.609. with a stronger dollar, gold off a couple bucks and change this morning. >> rosenberg is worried. he was in a column again. this time ableson says that he muttered. >> he must have talked to him. >> i don't think he did. i think he reads -- he steals
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the stuff that he reads from rosenberg and he will stick in a muttered by reading the guy's report. >> you can't say muttered if you don't talk to him. we have to call him up. call him and find out. if he says muttered and he didn't talk to him, that is -- >> he said muttered. i said i bet you he still didn't talk to him. >> let's call and find out if he did. you can't have mutter. >> that's a specific verb. >> it was in one of his reports. it seems like he might be muttering this. >> i'm going to e-mail him right now and find out. >> then we'll take it back. >> if he didn't, my gosh. >> how do you know he was muttering? that's your own muttering. you're transferring your own muttering. >> you're putting editorial bias into it. >> let's get overseas this morning and check out markets.
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terrori christine tan is there but first let's go to anna edwards. >> tough going in this morning's trading session. you may be pleased to know ftse 100 is in positive territory. so it seems there's a little more optimism as we head toward the middle of the day here. on the subject of greece and sovereign debt, you guys have been covering that story. eu is a saying they'll take no funnies but with regards to greece. won't take slippage on the agenda to get the budget deficit down below 3% of gdp the target is set at. you were talking about the recall of cars from some of the japanese automakers. anything japanese can do, the french can do better because there is an anunouncement they are recalling 97,000 cars. less than 10% of these two particular brands. not seen as having a big impact
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on the company. let's get to singapore for update on the asian trade. >> we're watching asian markets today. they closed down after the losses on wall street. nikkei finishing flat as investors picked up shares of companies reporting bullish earnings. toyota shares extended their losses. no surprise there. we're waiting for that press conference at 6:30 a.m. eastern time where toyota is going to explain how they plan to fix those faulty gas pedals. south korean automakers, stocks higher. investors hope they'll gain at the expense of their japanese rivals and that helped push the kospi up .3%. in the overall market that we had over here today, that wasn't bad. over in shanghai ongoing tightening fears causing stocks to fall by 1.6%. pmi for january coming in much higher than expected. we had stocks in hong kong managing to post gains of .6%. investors picking up bargains in
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there. hsbc big one in focus after he's saying they're happy with the relationship. hsbc denying the report they are looking at a merger. a three-month low after downbeat jobs data. rba out with a decision expecting to hike by 25 basis points. back to you, carl. >> thank you, lisa. the budget debate will dominate the washington agenda this week. our john harwood joins us this morning to help set the stage. help us get some perspective about the numbers. in a way, they are hard to understand. what you don't understand you let your emotions handle, right? >> well, we'll see the document later today. i think this is going to be a hard budget for the administration to sell. it may -- that's not a substantive critique of the budget but when you have cbo having come out a few days ago
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saying the budget deficit this year for 2010 was going to be around a little over 1.3 trillion and now the administration is saying it's going to be 1.6 adding money for a jobs package, it is going to be a hard sell for those members of congress who are trying to strike that balance between doing something about the economy now and showing commitment to deficit reduction in the long-term. the main part of the deficit reduction although the administration rolled out their freeze last week, that has some popular appeal to it but the main elements of the administration strategy will be dependent on that commission that the president is going to sign into law by executive order and, you know, in some respects you can envision republicans saying he's kicked the can down the road even though a lot of republicans want a commission as well. >> do you think the budget is going to be painted as a, getting tough on our long-term situation, b, coddling and helping along the economy that's
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still fragile or c, taking the middle road? >> well, i think the headline is going to be b because of this hundred billion dollars for job creation and that's how the administration wants to be seen. they want to be seen as right now saying job one is the economy and creating new jobs. and so some of the savings from the three-year freeze on discretionary spending, nonsecurity spending that the administration talked about, only $15 billion in the first year and that's on purpose because the administration says the economy can't take a lot more sort of destimulus right now and that's why they are moving that down the road. >> you listen to the president's q and a with republicans on friday. some of the most riveting television we've seen just off the cuff back and forth. what was your take on how he did on the prospects for any cooperation given the mood we saw in that room on friday? >> i think he did very well.
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some of the republicans also did well. paul ryan, for example, in his exchange with the president. i think he came off looking like the young star that he is in the republican caucus but the president by virtue of being the president dominating the stage and authority and prestige that comes with the office has a natural advantage there as well as the fact the camera was trained on him. this is a skilled and talented politician and his ability to go back and forth with him was impressive. cooperation on anything major and important are quite small and i think this was largely about both sides after massachusetts after the state of the union trying to demonstrate that they had good will and that they would try to have a dialogue but there's a reason why they haven't been cooperating over the past year. there's a reason why republicans didn't cooperate on the stimulus package and on many other things. part of it is political strategy. part of it is real philosophical
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difference between the two sides. that's tough to bridge. >> a couple thoughts. do you think the president knew his name was jeb and called him jim any way? >> i haven't had a chance to ask anyone in the white house about that. maybe the third time when you're corrected there's elbowing in there. >> how about the ongoing alito that's not true. it's amazing that should the supreme court sit there and say thank you, sir, may i have another? should they take their medicine and having everyone cheering on the left side? i see alito with the left wing media compared to the guy who said you lie. ale alito is the bad guy in this whole situation. is that how you see it, john? you shouldn't even shake your head. you need to say thank you, sir, may i have another? hit me harder? they're there to support -- they don't need to show up for state
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of the union. they are there at his -- as a respect to the president. >> joe, to be honest, i thought that was a real human moment. i don't think it's the same as saying you lie. he took on the decision that they made very directly and bluntly in ways that i haven't seen before. >> every left wing pundit is calling alito joe wilson. every one of them. frank rich. all of them. >> those justices are sitting there. they're getting criticized. they were deliberately silent on the issue of foreign corporation money in u.s. elections and the president -- as anybody does when you have a political situation where something is ambiguous, the other side will seize on it. now, you know, you can say that it's an unfortunate sign of how politics are getting that a president is going at the supreme court directly but
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that's the reality and presidents do disagree with supreme court decisions and we hear about it and i actually enjoyed watching that. >> when you are talking a lot of times, i'm going that's not true. when i'm talking you're over there going that's not true. >> i do want to say one thing. was that you whistling the hustle at the beginning of the show? >> that was me. thank you for in thing. >> becky quick, i'm bowing to you girlfriend. that was impressive. >> he think i can't whistle. >> there with a no soul in that whistle. ♪ >> until you can do it, i suggest you zip it. >> if i do it it will bring tears to your eyes. >> not to use the term girlfriend and that's you. >> is that politically incorrect? >> i think it's -- >> i like it. >> never mind. >> i like it. >> john, thanks. we'll see what happens when the president speaks. >> do it how -- how would you do
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it? >> girlfriend! >> something like that. would you do it more ethnic. >> coming up, why reading some books on your kindle -- interesting story. apple has that much influence. it could cost you a bit more. at 7:30, hank paulson "back from the brink" with a first person account with what he was doing during that financial crisis sitting down with steve liesman. as we head to break, a look at last week's winners and losers.
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welcome back. making headlines this morning, amazon.com is giving up on its price dispute with mcmillan. they are claiming that amazon's price of $9.99 for ebooks could hurt sales for hard covers. under the new model, the price will be different on the kindle. >> joining us, federated investors chief market strategist phil orlando and economist jay brycen.
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good morning to both of you. >> good morning. >> phil, it's great to see you in studio this morning. you were talking last week about how we got this great news that came through on thursday and friday and the markets were still down. what do you think it takes to prop things up? >> a terrific run from march 6th through the high about two weeks ago we were up 73%. we were due for a pullback. over the last two weeks, you have three big concerns. bernanke's confirmation, slowing china growth and obama slapping the banks around in the aftermath of the massachusetts miracle. i think investors have really focused upon those things and have used those skuexcuses to t profit. >> you don't seem to think things are over. we're due for a pullback and maybe the bull market continues? >> you look at fourth quarter earnings right now and i guess we're about halfway through the season. two-thirds of the company have beaten on revenues. you have consensus earnings for s&p that have now moved up to $76 a share.
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that puts multiple of a 14 times forward earnings. you have core inflation below 2% year over year. 3.6% treasury yield. multiples are too low. you'll see more corporate earnings improvements and stocks will go higher. >> massachusetts miracle? massachusetts disaster maybe. massachusetts tragedy maybe. >> depends on your point of view. >> i guess it does. i want to get that other side in. >> why are you looking at me? phil is the guest. >> i'm sorry. >> jay, what do you think of that scenario? things do seem to be turning a corner not only when you look at a lot of the numbers we're getting in on the economy based side of things but also when you look at these earnings. where does that leave you thinking we're going to be in terms of growth? >> in terms of the economy there certainly is a recovery going on. the numbers we got out on friday certainly overstate that. a lot of that is one-time inventory bounce. the recovery that we're looking at right now i think is slow but
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steady. 2%, 2.5% growth rate. nothing to get really excited about. i'm not a strategist here but it's hard for me to see the same sort of gains we got last year translating on as we go forward here. >> and you're basing that on what we heard from the president? he's laying out his budget and this is where we'll see spending over the next year as well. obviously putting a freeze on some things but still doing plenty of spending to keep the economy chugging along. >> this is an expansionary kind of budget. we're not cutting back. sooner or later we'll need to do that. as the economy expands, that budget will slowly start to come down. sooner or later we'll have to rein in the unsustainable spending that we're doing. >> does it make you feel good to see bernanke reconfirmed? >> i give chairman bernanke very high marks. certainly you can quibble about what he did as a chairman and before that as a governor but when push came to shove a year and a half ago when the
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financial system was melting down, those guys were creative so i was happy to see him be reconfirmed. >> phil, how do you get your arms around the notion that taxes are going up rather than down? there will be more regulations on banks. china will have to do something to put the brakes on. sovereign debt will be an issue. are those things -- how much are they a factor in your model? >> they're a factor in the model. if you look at improvement we expect in gdp, i agree with jay completely. 5.7 gdp number is probably the peak of the cycle. we don't think its over. first half gdp here looking at 4.5 and that slows to 4% number in the back half of the year. three handles looking out in 2011 and beyond. we think the pace slows as rates go up as government stimulus starts to fade but we don't think we're falling off a cliff. it's a demolition of improvement. >> market is always forward
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looking. if you look six months down the road as the market may be, where do you see things then? >> i agree that the market is probably starting to discount the second half of '10 or beginning of '11. we're not looking for another 73% improvement in stocks. we were at 1150 two weeks ago. maybe something in 1200 neighborhood make sense near term. maybe something in 1300 makes sense a year from now. that's a 15% gain. the easy money has been made. it will be a grind from here. it will be hand to hand combat. we won't see the same sort of spectacular gains we saw over the course of the last ten months or so. >> 15% is not bad. >> better than losing money in treasuries if we think yield is up to 4% near term. if that's your comparison, making money in stocks opposed to losing money in treasuries, that's where we come down. >> thank you for coming to the studio today. jay, great to see you. we'll get top stories when we come back and toyota set to
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reveal its recall fix. we'll have details on that when "squawk box" continues. as having to decide to go for it? at the hartford, we help businesses of all kinds... feel confident doing what they do best. by protecting your business, your property, your people. you've counted on us for 200 years. let's embrace tomorrow. and with the hartford behind you, achieve what's ahead of you. ♪
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we'll get this toyota story under our belt. carl, it's official now. >> they are releasing a statement and a plan. they say a comprehensive fix to the brake pedal problem. you know about the 9 million recalls around the world and halting production of some of the most popular models. phil lebeau joins us from new york with details about what toyota may be saying about this fix and how clear it is. good morning, phil. >> good morning. this is a physical fit for the gas pedals to relieve this potential for sticking accelerator pedals. it will be a fix with parts to go to accelerator pedals going to dealers within a week. some dealers may get it on thursday or friday but certainly within a week. the dealers will get these parts. the way it will work from here is if someone has contacted a
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dealership and said we experienced some accelerating problems with our vehicle, we're concerned about our pedal, those people will be handled first. after that it will be on a first come first served basis because keep in mind even though we have seen these cases around the country of accelerator pedals and people having problems in antidotal cases the majority of toyotas on the road involved in the recall, people have not experienced a problem. there's not a rush for people to go into the dealership. they want to have it fixed but dealerships will handle urgent cases right away and immediately after that repair those vehicles as people bring the vehicles in. >> phil, i'm looking at the release right now. engineers developed and tested this solution. this is not an experiment. they think they have the fix, right? >> they believe they have the fix. the interesting thing here, carl, is many people looking at the complaints and investigations from the national highway traffic safety
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administration they have brought up the question whether the problem is a physical one with sticking accelerators but one in the electronics. you have to wonder if this fix will take care of complaints and questions out there about unintended acceleration. toyota says the problem is not in electronics but in the potential for physically for accelerator pedals to fix. we tested this solution and believe it will take care of everything. there are a number of cases out there where people say it's electronics and not the pedal sticking. when you have the current vehicles out on the road that this fix is intended for at the same time cts, the accelerator pedal manufacturer out of indiana, it is building new pedals that will go into future production. so you have two things going on at one "timtime for toyota.
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take care of 2.3 million models out there and future models. >> i'm really confused by the idea of whether it's the electronic throttle or not with questions out there. has the company taken on those very specific charges maybe 11 problems over the last year only one of them i read -- i don't know how much is true -- i read was related to something like this. if they don't take on those cases one by one, how do you feel confident as a consumer? >> listen, they believe that it is not in the electronics. they believe they have looked at those cases where there have been complaints, accidents and/or crashes that led to someone dying and they said we looked at this. it's not in electronics. we believe this unintended accelerator problem is with sticking pedals and condensation
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building up. we're talking about a physical manufacturing issue here and not in the electronics. that's what toyota is saying. ultimately we'll have to see what happens over time. toyota is going to make a huge push here to reassure people that this is it. they have got it taken care of. you have to wonder about the confidence of consumers because they came to us back in october and said we think it's because floor mats are holding down the gas pedals on vehicles. we'll recall 3.4 million. now they came back to us a couple weeks ago in december and they said, okay, maybe there's some problems with unintended acceleration and sticking pedals. if they come back in the future saying it's electronics, things will be really tough for toyota. >> you have that right. in the meantime, even with all this, they have to say in the event that a driver does experience acceleration, the vehicle can be controlled with firm and steady application of the brakes. don't pump the brake because that depletes what they call vacuum assist which makes the situation even more difficult.
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>> and they also want to you then guide the vehicle over to the side of the road, put it in neutral. don't turn it off. then you account off the power steering. that's what they want you to do. the interesting thing about this, i had a number of people come up and say can i do that if i'm on the highway? you can do it but not as easy as it sounds. this is one of those things where if you have unintended acceleration. that's a serious issue when you drive to the point that people are going to say do i remember exactly what i'm supposed to do in what order? >> phil, an interesting morning. we'll see what lentz's take is later today. >> jim lentz, head of toyota north america coming on first at 7:30. >> okay. thanks a lot. phil lebeau in new york. >> yeah. not only does he mutter but he suggests glumly. he does a lot of -- amazing. >> david said he had people tell him that he writes his notes as if he's talking to them and maybe that's where it's coming from. >> that's an understatement.
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very close. there are some other verbs that he uses to describe how he gleans it all from a written report. to futures pit in chicago, jason, we have started at this point it looks like -- we discounted so much good news when it finally got here, unable to move the needle even 5.6 or 5.7% gdp. what are we going to do? keep pulling back until we get worried again and then go up in the face of worry? have we had our move? >> it's the deepest correction now in the nasdaq since the march low and we're within a percent of doing the same with the dow and s&p. you mentioned it a lot of it priced in. the real story for the month was continued acceleration in the dollar index and what that did to commodities and portfolio allocations. the relationship between large caps to small caps made its high for this move whereas we got
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into january and you saw new highs in the s&p, etcetera. on a relative basis, that relationship had not made new highs. a lot of it is a function of the fact that portfolios were positioned for a weaker dollar adding earnings to large caps. as the dollar index rallied for reasons related to greece, china tightening, etcetera, that's just caused players to shift around. we're getting that correction, if you will. it may feel like a lot but it's 7% in the midst of a big rally we saw off march low. >> i guess there's ways you can understand it, i think, isn't there? the market has to come to grips eventually with a dollar going a little bit better and that's been kind of a headwind because of the risk trade. it has to come to grips with interest rates going up because the economy is improving. globally. both of those things long-term would be positive but that hasn't been what moved the market from the lows.
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it's just been liquidity i guess. so it kind of has to come to grips with that and then be able to move higher on that, right? >> i think that's really what we'll find out over the next two to three months. i think until we were to see the s&p move beyond 10% correction with velocity, this is portfolio allocation. you'll see stocks move higher in the next earning season. that june correction of last year that was approximately this much in percent took four weeks. we're only eight days into this one. we'll probably see a rally this week to start the month and try to get new legs under us and maybe on better data but that will run into some resistance just above 1,100. we're probably in a range bound area. it's really that sweet spot as portfolios reallocate. >> remember that june. put us to sleep. by the time we got to july, there was no reason for the
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market to go up again and it made another 30% or 40%. thanks, jason. see you later. >> if you have comments or questions about anything you see here on "squawk" go ahead and e-mail us. we'll take a quick break and when we come back, we'll have news inside and outside of the world of business including last night's grammy winners.
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welcome back. futures hanging in on a monday morning after we lost ground on friday. we're going to build in anticipation of the jobs numbers which comes around this coming friday. a couple headlines this morning. another record for "avatar."
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the movie surpassing $2 billion at the worldwide box office taking the number one spot for the seventh straight weekend. james cameron's movie now set to surpass "titanic" within the next few days in america. let's get a check of news outside the world of business. hey, monica. >> good to see you. after a suspension of several days this morning, the u.s. military set to resume air lifts of injured haitians to hospitals on american soil. although the military originally said the flights were suspended due to florida's financial worries, the white house now says "funding is not the problem." england's prince harry following in his mother's humanitarian efforts over the weekend. he's making a three-day visit to
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bash a . six grammy awards for beyon beyonce. taylor swift took home four awards becoming the youngest artist to win top prize for album of the year. did you stay up to watch it all? >> no. >> did you watch any of it? >> what time did it start? >> 8:00. >> i didn't see any of it. >> we were talking about this morning. i was glad to see kings of leon win because joe loves them. do your kings of leon. >> somebody! >> i don't like the grammys. >> lady gaga and elton john. >> this is for the music industry which had tough times. they have so many categories that everyone wins because it's one big promo for the music industry to try to sell. it's been hard before the mp3. >> it's not about recognizing art. >> no. it's about who they are going to
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promote any given year and make stars out of them. >> there's a guy in our church yesterday who stood up and told us about this sign. i think it was in iowa. it says welcome to whatever town this is. home of 1,284 happy people. and one old grouch. >> yeah. but basically there's a category -- let's see. none official cd done with the most famous rap including a singer. >> all of the award shows promote their industry. >> they don't have every single -- >> academy awards is the same thing. >> not as many. you can have record of the year. single of the year. new band of the year single. everybody wins. i'm a grammy winner. yeah. >> beyonce sure is. six times. >> she is. she'll probably win 50 of them before she's all said and done. >> call beyonce up on youtube. that's worth watching.
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>> all right. thank you. great to see you. >> take care. >> one grouch. yeah. >> i just said one old grouch. >> i'll find the sign for you. >> can i be a middle-aged crouch? >> sure. one hip grouch. coming up, darren will join us with one unlikely super bowl advertiser this year. that's why i book with expedia. so i can find someplace familiar... or somewhere more distinctive... nice! then i can compare dates to find out when i can save the most cash. done and done. we should do this more often. more choices, more savings. where you book matters. expedia. ♪ dot com
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a stel vised golf and sunday afternoons go hand in hand. of course unless that sunday is super bowl sunday. darren rovell is here with a special guest that is hoping to change that. callaway golf, darren, is doing what? >> what they're doing is betting some super exposure can help drive sales. the company is announcing today it will be a presenting spongesor for a half hour of the super bowl pregame show. the first time ever that the super bore pregame has been done by a stand-alone golf company. joining us callaway ceo george fellows. thanks for being here. super bowl, golf, not necessarily a natural. why? >> well, it's more natural than you think. a very significant proportion of golfers watch the super bowl. plus, the fact that particularly this year, coming back off of '09, the super bowl gives us the broadest exposure that you'll get in any kind of advertising.
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and we think that it represents the perfect opportunity, particularly this year. we have a very, very strong new product lineup that's been -- received -- it has received gold medals from the golf digest equipment issue. we thit broadest audience we can get for it is the way to start the year. >> we talk about golf being the ultimate discretionary buy. how bad was 2009 and how long is it going to take to recover? >> well, '09 could have been better for sure. it reflected pretty much the economy. i think it will be a two-year recovery. i think 2010 will be significantly better. we're seeing signs that have now. before we get back to what is a more traditional year for us it will probably be 2011. >> heavy discounting still going to happen? >> i think that will be reduced significantly. '09 was an exception. we're expecting that there will be some discounting but not nearly at the level that '09 represented. >> you guys are projecting 4% to
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9% growth in the u.s., i believe, for this year. what are the foreign markets looking like? i know that you just moved into india. >> well, foreign markets are actually leading as far as the recovery is concerned. japan, korea, china have done particularly well, even in the context of an '09. so we expect them to grow at a faster pace. india represents sort of the new frontier. we think that like china, it's going to be a huge market over some time. we just went into it. we think we're a little ahead the curve but it's exactly where we should be. >> talking about tiger frshtion a nike golf perspective, obviously that's a competitor, how does that affect them and how does tiger being out affect the overall industry? >> i think tiger has had a positive effect over the industry over the past ten years. he's going through a personal issue. we certainly hope he resolves that. but the game is larger than an individual. i think that perhaps some
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viewership issues may have existed the early part of the season, but we think this will be sort of an iconic year when you realities the u.s. open will be at pebble, the british at st. andrews. these are big events with very, very important locations. so i think the -- i think the viewership is going to come back very strongly and we'll do well. >> phil mickelson is one of your endorsers. a little controversy over the weekend, though it didn't have to do with your club, with the ping club that he was using, that kind of fit into this loophole discussion of whether he was cheating or not. what's your take on that? >> cheating is an absurd comment really. the fact is that the club is approved by the pga tour as being acceptable. therefore, he has every right to use it. we think the overall groove roll that has been promulgated by the usga has some issues with it that i think will be resolved over some time, but phil was absolutely within his rights to use the club. >> and you saw his response.
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>> yeah, he said yeah. >> he said, i'm not even going to say anything. i wasn't expecting to be slandered and will let my lawyers handle it. he's not happy and he has right to be. >> it's going to be interesting. finally, to get your super bowl buy that, return, what has to happen, the return on investment? >> i think this year particularly, we're looking to outreach in order to grow this game. i think we have to talk to more than just ourselves. we have to talk to people who are perhaps not ardent golfers to show them this is a game they should get involved in. it's particularly important in this kind of a year because the ioc's vote to put golf back in the olympics in '016. we think some people will take a look at that sport and get more involved than they have in the past. >> thanks so much for joining us this morning. when we come back this morning, the ceo of autonations will talk about the troubles for toyota, the nation's largest toyota retailer dealing with the company recalls and suspended sales.
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and then cue the hustle. look who is in the squad box room this morning. today's guest host, jim nussle. let's dance straight ahead.
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toyota's reputation on the line. the japanese automaker rolling out a fix for its gas pedal problem. the president of toyota usa will be our special guest. the white house about to roll out the budget for 2011. but the numbers might be tough for congress to it swallow. jim nussle, former director of the office of management and budget, will tell us if it's going to fly on capitol hill.
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hank paulson on the brink. >> this is really tough. >> his haunting recount of the demise of lehman brothers on that weekend that nearly collapsed the banking system. >> that was one of the low points in my life. >> "squawk box" begins right now. transportation safety administration. good morning. and welcome back to "squawk box" here on cnbc. becky quick and paul quint nia. the latest on toyota troubles. we'll talk to mike jackson of autonation. he probably sells more toyotas than anybody else, more of every car than anybody else. 7:30 eastern president of toyota usa jim lents joins us. then henry paulson's memoir of the financial crisis, his role
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of treasury secretary officially hit sth books. and today senior economics reporter steve liesman spoke to paulson, who reflected on those dark days in office. he certainly didn't need to write a book to get the advance or to make -- this is about defining and giving his side of the story after what happened, because we're all 18 months later, whatever it is, a year later, everybody is looking at it now -- did you -- i read an interview. these people think they should have let all of them fail and come what may. that if you took care of commercial paper, you could have let all the banks who deserved to fail fail and that would have been the way to handle it. >> easy to say. >> everybody saying it now. >> forgetting where we were at that point. >> everybody is saying it now, though. aig should have failed and if banks should have failed from it, they deserved it, too. >> we were not going back to any kind of financial stone age at
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all. and that unemployment would not have been 25% the way paulson says. >> then there's other people that think if there's no confidence in anything, that that paper money -- >> and the people closest to what's happening, they're pretty much all on the same page that, yes, we would have fallen off a cliff. if you listen to people on the periphery, that's what they think. but the people who knew what was happening. >> i was just reading that in "barron's." he it was muttering. >> did you talk to him? >> no, but i could tell from the way he was writing, he was muttering all the comments. >> you really have to get up an hour earlier. you missed our whole conversation. >> you're going to bring us though, or is it you, someone will bring us the headlines. it's you -- >> make the pretty words move. a couple of quick headlines. the president's newly unveiled budget a record $1.56 trillion budget for 2010 and plans to cut it by a trillion dollars over the next decade. the president will speak on the
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new budget at 10:45 this morning eastern time. you'll see that live right here on cnbc. amazon.com is, for now at least, backing down in this dispute with book publisher macmillan over electronic books. the publisher wants a higher price of ebook version, up to $14.99 a book. amazon has been sticking to the 9.99 price. another sign of the economy rebounding. the semiconductor industry association says sales for all of 2009 fell 9% from the year before. toyota rolling out its fix for millions of recalled vehicles including some of the most popular models. the japanese automaker taking out a full-page ad in newspapers yesterday characterizing it as a temporary pause to put customers first. phil lebeau is in new york and has all the details. >> becky, this is a fix that will begin either late they are week or more likely the beginning to middle of next week
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where deal he recalls around the country will be receiving repair parts so they can fix the accelerator pedals in question on 2.3 million vehicles. those are vehicles already sold mostly over the last three to four years, those out on the road as people start to bring them into to dealerships. the dealerships will stay open extended hours and essentially adding friction, if you will, a little extra friction into the accelerator pedals. essentially, they've been found to wear out over time and in rare cases cause the accelerator pedal to stick. toyota believes this fix which they say they have tested will take care of the unintended accelerate racial and sticking pedals. early next week, there will be training involved at the dealerships. i would suspect by the beginning of next week, middle of next week that's when you see had
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vehicles going into dealerships being repaired. the first emphasis on the cases where somebody has gone to the dealerships and said i have had problems with the accelerator, i'm not comfortable driving those vehicles and they've been parked. very rare we have seen that happen but there have been anecdotal cases. those will be fixed first and then first come first serve as the dealerships reach out to their customers and they bring them in to be repaired. >> all right. we got to -- it's very interesting, phil. in your view, is it going to end with floor mats, do you think? >> floor mats are separate. but you bring up a good point, joe. what happens here -- and i'm hearing this increasingly from people who are studying con sirm attitudes, is first they told us the floor mats were the problem and that was back in october. then in december they said, listen, we might have sticking pedals. that's the issue. is this the fix once and for all? because now you've come to us twice, the public, and said we believe there's a prob lem with the pedals but we think we have
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taken care of it. first removing the floor mats and shaving down the pedal. now it's doing a physical fix on other pedals. the question is, does this take care of everything because there have been some who have suggested there's an issue with the electronics involved. if toyota does not completely resolve this this time around, then this is going to be ten times worse than what they're experiencing right now. >> it's really amazing, phil, that some of the u.s. automakers -- the domestics are in a position, having gone through some of the very tough things they've had to go through, hare in a position where this is almost serendipitious. they have a real chance here. >> additional incentives for toyota tradins. >> all three domestic automakers pouncing. this is the opening they've been waiting years for in terms of toyota quality. that's where toyota has beaten up the big three. it's on quality. it's not on design. it's not on the styling of these vehicles. it's on quality. and now toyota is suffering in
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its strength. so you're seeing them offering -- the domestics offering incentives for people to come across the street. i wouldn't be surprised if they steal a little bit of business here. will they take toyota down completely? no. but they're going to make some headway in terms of winning back some customers. >> thanks phil. we're going to get some more here with a reaction as mike jackson, chairman and ceo of autonation, the country's largest auto dealer -- so many times -- great to see you. good morning. >> good morning, joe. how are you? >> i'm good. so many times we made the point you love all your children. you sell domestics, you sell foreign. you just -- you just like to sell cars. buff what's your take on this whole situation with toyota, mike? >> well, the focus has to be on the customers. and i would say in our stores today, we have a high level of concern from toyota customers. but it's not a panic. we have intense communication with our toyota customers every
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dation. and, joe, i would point out not only do we sell toyotas, but of course we care for our toyotas, both the customers and the vehicles. it's like running a hospital for cars. and we stand with -- unequivocally with toyota to repair these vehicles as quickly as possible, to put this issue behind us. and if that means at our stores we have to be open 24/7 to get this done as quickly as possible, then that is what we will do. and i agree with what you said earlier. this is an opportunity for competitors that have dramatically improved their quality over the years and now can make that point. but in this circumstance, we are standing unequivocally with toyota. and i expect -- there has been a great partnership between toyota dealers and toyota manufacturer over the decades, and i think there will be a strong response from all toyota dealers to take care of these customers as quickly as possible.
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>> go ahead. >> how quickly can you have take care of 2.4 million cars being brought back in, mike? what are we talking about timewise? >> well, that's going to take some time. thank goodness the part needed is relatively simple to manufacture. and the repair is relatively simple. it will probably take less than a half hour to make the repair. it's still, though -- it's several million vehicles. and that's going to take several months to get through all those vehicles. >> how convinced are you that it ends with the pedal? what do you make of some of the stories that want to make electronics part of the potential problem? >> i think it's been a complicated story, carl, because indeed there are two issues that lead to the same complaint. there is the floor mat issue, where we have to shave the pedal. and there is the sticking pedal. so that makes it a complicated story. there is no electronic malfunction whatever.
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these are both mechanical issues. but what is not clear to everyone is that toyota is also making a change in the software programming that leads to a brake override. namely, if both pedals are depressed -- the accelerator and the brake -- the engine management makes a decision to give supremaciy to the brake pedal. german designers have been made this way and now toyotas will be reprogrammed that way. i think that's appropriate. >> i can't imagine why you would ever do it the other way. >> let's favor the accelerator. >> never pick out any countries -- >> you have to go with the german logic sometime. >> why would you have the accelerator override the brake? if you are using the brake, you probably want to slow down, ride? >> i agree with you, joe. so don't force me to argue the other position. but the other position is that the owner should know what they're doing and you shouldn't supersede the owner's instruction. if they want to push both ped s
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pedals, that's their business but i think everyone is coming to the conclusion have a brake override. >> didn't mean it hitting the brake. we're sure you want to keep hurdling down -- >> this from mr. lead foot. >> i get the horn fixed before i get the it brakes fixed. what's the run rate going to be this year, in your view? what will we be able to do overall for the industry? >> it's going to be for the total industry 11.5 million units. the way to think about that, joe, is if you remove the nonrecurring cash for clunkers from '09, the selling rate was below 10 million units. that's a good healthy 10% to 15% movement. that's still depression level of sales but i'm confident it will happen because we have an improving credit environment and the fleets out there are very old. anybody who has rented a car lately has noticed the high mileage on these fleets. they're going to have to be replaced this year. so i think it's fairly confident 11.5 million.
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then the industry will really hilt its stride in 2011, 2012. >> good to see you today. thank you. >> good seeing you this morning, including you, becky. >> especially -- i know what he's saying. coming up at 7:30 a.m., the president of toyota usa jim lentz will join phil, keep in mind, from new york. >> we'd love to hear what you think of the whole story and whether toyota can fix this problem. drop us an e-mail. squawk@cnbc.com. when we come back, hank paulson on the brink. the former treasury secretary with his book recounting the chilling moments surrounding the fall of lehman. he'll had talk to steve liesman about that at 7:40 a.m. eastern time. and then let's do the nussle. so hustle up, guest host, jim nussle. you're taking the lead. time now for today's aflac trivia question --
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now the answer to today's aflac trivia question. the answer, barack obama.
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all right. welcome back to squawk box, everybody. this morning the futures look brighter if you're a bull. dow up 45 points above fair value. in our headlines, bloomingdale's is opening its doors in the middle east's biggest mall this weekend. the dubai store its first shop out of the united states. it first announced the venture in september of 2008. the president's 2011 budget dew out in less than two hours. we'll discuss it with our in-house expert, the president and ceo of the nussle group. he joins us here on set. welcome back, jim. good to have you back. >> great to be with you. >> $1.6 trillion. did you ever think you'd see a number like that? >> the thing is, this is $5 trillion of new debt over the next five years. and the budget plan that the president put out that freezes spending and tries to get it under control takes that $6 trillion down to $5 trillion over the next five years.
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so i suppose you could say it's a good start. but to think that we're going to add a trillion dollars a year on average over the next five years is breathtaking. and it's, to me, not a plan to get us back into a situation where we're controlling spending or controlling our destiny. >> as you looked at it either last night or this morning, what were the big surprises -- >> it's not out yet. the president -- we've heard drips and drabs. but i think the big surprise is how little impact the budgets freeze is going to have. we're talking about 15%, 16% of the budget when we're talking about freeze. like saying if you're a family, in order to get my budget under control, i'm going to freeze my electric bill this month. everything else is out of control but i'm going to freeze my electric bill. >> that's why he got those unwanted laughs at the state of the union. he it was trying to compare the government to the household but this is not the way households would try to put their house in order. >> i give him credit for controlling that 17%. good luck with the congress on actually getting that done.
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but i think we've got to do more. entitlements, which is the automatic spending, that's two-thirds of the budget automatically had spent even before congress shows up this week. automatically spent. that's what's going to happen no matter what. that's out of control. >> you want that to freeze, too? >> you can't freeze entitlements without changes in the law. but you shouldn't add to the entitlements, which is what much of the argument is for the health reform bill over the last year. >> he's already getting hit from the progressives for freezing what -- >> for doing too much. >> that's way too much for them. >> way too much. >> that illustrates what he's up against. >> this is a wake-up call because just like you and i, if we had out of control credit card bills or whatever, we'd have to go have a conversation with our banker. and eventually, the united states is going to have to have a conversation with our banker. and that banker unfortunately isn't us anymore. it used to be like in world war ii when we ran up debt, we owned
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that debt. today so much of it is owned by china and overseas. that's the people we're going to have to have a conversation with. >> hank paulson, his new book south this morning. there were articles over how the russians were apparently trying to get china to give as you lot of grief during this crash to begin with. china didn't go along with it, but it points out they have the power to do it. >> right now china is financing our consumption as much as our -- as poor as that has been. they're selling us goods. they need us to buy those to prop up their economy. right now twaer kind of in this together, two drunks staggering down the streets you could say. we have got to go -- about to be very, very sick. but we promise this weekend, we're going to freeze. instead of eight beers, we're going to only have a six-pack. that's basically what we're saying. >> so if you it were still at omb, how do you sell a package of austerity when the economy is still so iffy? >> i think it's what we were
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just talking about. you either have this conversation with yourself, with the country, with congress, the president right now. or you're going to have this conversation at some point in time with people who really don't have our best interest as a country in mind. and those are people in china and other places around the world. >> that's tough. >> it is tough. >> you said the freeze, though, is a good first step? >> of course it is. thank goodness that they're doing that. but i think they could have gone further. cbo has -- congressional budget office has 120 examples of things that the administration could do, should do, to actually cut spending. not just freeze it but cut it. and i think that's where they have to start looking. >> then we've got this other issue on recovery had.gov the website where about 500,000 people, a little more have benefited from stimulus, which kind of doesn't fly with the figure that they've been giving that 1.5 million jobs have been saved or created. >> and still use this thing
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about saved jobs, which nobody can necessarily put into any kind of empirical data. this is a political website. i mean, everyone knew that. everyone knows that. the bottom line is that we're not yet creating jobs. the president in the budget he's about to submit has $100 billion for yet another new jobs program, which only about half of the so-called stimulus money to create jobs has even gotten out the door. we've got to do what we've been doing at the very least before we add on to it, i think. >> we'll talk about the political realities with that senate bill in a little bit with jim. coming up, we have steve liesman, his interview with former treasury secretary hank paulson his new book called "on the brink" released today. details the emotional strain during the financial crisis and his personal story about the ordeal coming your way in a special interview. "squawk box" will be right back.
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when we come back this morning, the big fix for toyota. the president of toyota usa jim lentz on the damage control sundaying this massive gas pedal
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recall. the former treasury secretary hank paulson said he was gripped with fear and felt ill. one of the many moments he describes in his new book "on the brink." steve liesman spoke with him over the weekend.
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welcome back to "squawk box." toyota usa president jim lentz will talk about the big fix for the automaker's damaged reputation. then at 7:40, "on the brink" with former treasury secretary hank paulson, his recount of the lehman brothers collapse and all the stuff that happened at the same time. that wasn't all that was going on. merrill lynch was being hastily sold to b of a and aig was
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waiting in the wings to almost bring the entire system down, supposedly. and at 8:00 a.m., we're expecting quarterly results from exxonmobil. >> refining margins, lowest of the year. troublesome. >> one analyst said exxon may be able to dodge some of that that's not necessarily to be painted with the same brush, but it will be interesting when we see it. >> it certainly will. meantime, we've been keeping an eye on the markets. they've been in positive territory this morning. if you're watching the futures, the dow futures up 43 points by fair value and the s&p higher as well up better than 4.5 points above fair value. president obama's new budget a record $1.65 trillion budget for 2010. the white house has already released a good many details with the full budget set to release at 10:00 a.m. shortly after that, 10:45 eastern, the president will speak about the new budgets proposal which details plans to
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cut the deficit by a trillion dollars over the next ten years. morgan stanley is making plans to hire several hundred traders over the next few years according to the "financial times." the paper says morgan stanley wants to strengthen its securities business. the chinese company buying the hummer brand have agreed to push back the deadline to complete the sale. it's now at the end of february. the original agreement had a january 31st expiration date. the delay apparently involves various regulatory approvals. selling car brands lately has been difficult. >> it has. people are -- >> this hummer, it's like they drag on and on and on. >> and ready to just throw their hands up and say forget it. >> meantime, we'll talk about the budget later today. obviously, the president is talking later this morning. jim, really quickly, do you think -- i know you are not a market maven, so to speak. would the market retward austerity or worry it would deny the economy oxygen? >> i think it would probably
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reward stability. it what we're concerned about, we've seen it so far and says in this article the budget deficit will eventually stable itz at $800 billion. that's twice as much as any budget deficit in history. i think probably what we need to see here is a plan. they're not going to necessarily say it's got to be exactly this number or that number but i think a plan to get down to some reasonable number in the future has got to be what they put forward. >> we'll hear what the president says late they are morning. meantime, toyota is rolling out a fix for millions of recalled vehicles that include some of the nation's most popular cars. phil lebeau joins us with a special guest. phil. >> and, carl, i'm joined by jim lentz, the president of toyota usa first on cnbc to discuss the fix of these accelerator pedals. first explain the fix which you just announced in the last hour. essentially, what's going to happen at your dealerships beginning late they are week? >> it's about a 30-minute procedure. basically, we will reinforce the
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overall accelerator pedal with a precision-cut metal plate. basically reduces some of the excess friction. >> how confident are you that this is it, that you have found the problem behind unintended acceleration in toyotas? >> very confident. between the first recall that we've had on the entrapment of the pedal and now this on the overall pedal, i think we have it. >> i have to be honest with you. most people are listening to this and there's going to be an air of skepticism. you came to us in october and said we believe unintended acceleration is called by floor mats in trapping the pedal. then you came back in december and said there may be sticking accelerator pedals. we're going to be recalling these vehicles. then finally last week or within the last two weeks, you said, we're going to stop production and we're going to look for a physical fix. there is an air of questioning whether or not you really have your ducks in a row here in terms of unintended acceleration. >> we are very confident that the fix in place is going to
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stop what's going on. in terms of stopping our production at our plants, as you can imagine that, was a very difficult decision to do. but it was based around trying to put all of our resources of getting parts available for our customers, to get customers that are down. all of this right now is very important that we take care of our existing owner base. >> when you look at the individual accidents -- and "the los angeles times" has been doing some extended investigative pieces on this -- and you look at these reports of accidents for unintended acceleration, there is a real question mark about whether or not the electronics in the break braking mechanism are involved here. in other words, it's not a physical fix that's a problem here. that there is, for lack of a better term, a gremlin within the electronic system causing these problems. >> we're confident there is not. we have tested it. outside agencies have tested it. there are failsafe mechanisms within the electronics, so we're confident it's not an electronics issue.
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>> you've tested to make sure it's not electronics? >> yes. >> it is 100% the condensation building up and the friction. ? >> in this it is the moisture that builds up that adds to it along with the worn part. >> how many cases do you have twr somebody has brought in their camry or their corolla and have said we had a problem, we think that our vehicle was -- had unintended acceleration or they're not confident? in other words, how many are at dealerships that people are not driving because they're not confident in those vehicles? >> i can't tell you. i don't know that specifically. i can tell you that the sticking pedal situation is a very rare occurrence. and it tends to happen over time. it just doesn't go from acting normal to sticking. you'll see slow return. you'll see some notchiness in the pedal. but it's something that does take time to develop. >> the national highway transportation safety administration produced some documents that you have filed with them showing that the first case of unin fended acceleration
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that was at least brought to your attention happened way back in 2007. we're three years later and it seems this only acceleratored in the last three months as public attention is brought to it. are they dragging their feet. >> if you look at 50 years in the united states it's built on quality, dependability, reliability and safety. we take safety very, very seriously at this company. we acted very quickly in the first case of the entrapment. we concentrated on the floor mat at that point in time. and not on reshaping the accelerator. we now are reshaping the accelerator as well as new floor mats. in the sticky pedal issue, the first time this became apparent to us through technical reports was really in october, late october. so we've gone very, very quickly to investigate it, find a fix. and now we're going to be implementing that fix to our dealerships beginning this week. the important thing right now, to build trust back in our
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customers. they understand that we know what the problem is. we have a fix in place. and we're going to get these cars fixed as rapidly as possible. >> but is there a problem or potential problem that customers have lost faith in toyota because first you came to them in october and said it's the floor mat, then you came to them in december and said it's a physical issue with the sticking of the accelerator? there is a pattern here that has some people saying, i'm not sure i can believe toyota when they say they have got this nipped in the bud. >> first off, we've apologized to our customers, and we apologize for the concern and for the inconvenience that we've caused them. we are truly sorry for that. i think they have faith in us. i think the best way to look forward into the brand is to look backward. we've done a great job taking care of our customers. our dealers have done agreat job taking care of our customers. our products have been safe, quality, dependable. the way we stay in business, the -- what sets us apart from everybody else is that we build
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quality products at affordable prices. safety has always been at the utmost importance to us. >> one last question. i know you suspended sales last week. how much have your sales been impacted by the fact that you stopped sales and you've had people who were programs not going into a dealership because they're worried about the quality of toyota vehicles? >> i can't tell you that right now. we're closing the month out tonight. we'll see the total sales numbers. obviously, it's had an impact because of the stop sale. but i can't tell you exactly what the number is. if i look at some of the lines not impacted on the lexus side and scion sale there hasn't been much sales degradation at all. >> jim lentz joining us first on cnbc to explain how toyota plans to fix these pedals in question. so, carl, that's the latest from here in new york. back to you. >> appreciate that. thanks to jim for joining us on an important story. when we come back hank paulson.steve liesman sat down former treasury secretary to talk about his new book that includes his account of that fateful weekend that led to the
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brink, inside the race to stop the collapse of the financial system," that hits the book stores today. our steve liesman talked with paulson who opened up on those very dark days surrounding the fall of lehman brothers. >> really personal account. we present the first of a five-part interview with him in which he talks about his new book "on the brink," a gripping account of the collapse of the financial system and the effort to save it. i began by asking him how he felt the moment it was clear on sunday november 14th after a fire furious weekend of negotiation. it was clear lehman was going to blow up. >> that was one of the low points in my life, because i had -- if you run a financial institution, you know what it means. so my heart went out incredibly to the lehman management and all the people of lehman. and then i knew -- which was much more important to me, because as treasury secretary, i certainly didn't want my record
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to be that while i was sitting in the seat the economy and the financial system collapse. so i was saying, what do we do? and i didn't have answers. we had been trying to turn over every stone. i knew how difficult it is to sell an investment bank over a weekend. and particularly where the markets are so fragile. but i said -- i just -- my stomach knotted up. and usually when i'm playing offense, i -- the fear goes away. because i know what to do. but for that moment there, i had no idea what to do. and i knew everyone was going to be slolooking to me for answers. so as i say in the book, i stepped out of room because i didn't want to do this in front of other people, took my cell phone out of my pocket where i could -- and called my wife at home and just simply said, wendy, this is really tough.
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i'm scared. people are looking at me. i don't know what to do. pray for me. then i -- you know, i pulled myself together and put back on my armor and went down and pretended like i knew what we were going to do. we're all going to get together and we're going to manage this and we've been preparing for it for a long time. >> in the book, it's a little difficult to see what you think about dick fuld but it seems to me that he doesn't get it during a lot of the weekend. >> i can imagine being treasury secretary when the economy melts down and we have another great depression. that would be worse. but to be running a financial institution when it fails, i mean, obviously dick was in great pain after that happened and there would be something wrong with him if there wasn't. >> i found it incredible that he calls you up after t.a.r.p. is passed and says, let's put
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lehman back together or something -- >> it wasn't after t.a.r.p. had passed. after we had gone to congress. yeah, that was a sad -- that was a sad conversation. >> it's amazing in the book how hard you worked. and as a reporter covering you, i know how hard you worked. it must be difficult for you right now, given the anger that's out there, people really blame you for what happened. how do you deal with that incongruity that people think you messed up. and you think you ultimately saved the system. >> i -- first of all, i'll say, which is quite remarkable, that i have people come up to me all the time, and no one has ever said a rude thing. no one has ever said anything but thank you. the closest i had, some guy coming to do that, was in the airport the other day when he came up and said you're hank paulson, the treasury secretary, aren't you? i said, yes.
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he said doesn't it bother you to be recognized like this? i said, no, people usually say pretty good things. he looked at me and said, yeah, i guess people are pretty polite, aren't they. but to get to your question, i really -- i feel so strongly that -- that looking at hindsight that the major decisions we made were the right ones. and we made them without a playbook, dealing with very unprecedented challenges with imperfect tools to work with and in a really heated political environment. and they worked because this system didn't collapse. we don't have -- we didn't have 25% unemployment like they had in the great depression. >> in the next hour, paulson comments on the battle over bernanke and the next steps he thinks need to be taken to make sure it doesn't happen again.
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and then during the day, he talks about the mistakes that were made in lead-up to lehman, whether goldman was really in jeopardy and recounts some of the more heated conversations he has with politician sltion at the time like john mccain. there's a bit of a threatening thing that goes on with candidate john mccain at the time. >> a lot of the coverage that the book is getting centers around the physical toll that it took on him and his christian science and things like that. >> i asked him about this. there's a moment, carl, where he doesn't take medicine. he believes in the power of prayer. and he's given a set of sleeping pills because he has to go to sleep. he cannot really function without it. and he looks at the pills and then he recounts as he dumps them in the toilet and flushes them down the toilet. there's sort of a climax in the book when it comes to the narrative of the companies and then there's a personal climax. that's one of them right there. he just goes on and on and on. you can disagree with what he did -- and i think a lot of people do -- but you can't disagree with how hard he tried to do what he believed in
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because that's apparent. day after day after day, you get done with no sleep on lehman, right around aig and just come off a fannie mae, freddie mac and interesting about president bush and his interaction with him. >> is there anything in hindsight he wishes he had done differently because obviously in the heat of battle you may make different decisions. >> the thing i didn't know and i guess we have andrew coming up in a second, i didn't realize they had done this internal had study on housing. they do this and come to the conclusion it's not a problem. and what they come up with is they don't realize how the whole thing is financed. i asked him about this in one of the other segments we'll play during the day. i said, you're from goldman. you're the guy, if anybody gets this, the sieves and off balance financing -- he said we didn't know. i think if there's one thing he could get back, he came in in '06. he said there's going to be a blow-up and he told the
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president. he didn't know where it would come from. they study housing and say it's not a problem. >> how smart is bernanke? what was his quote about subprime being -- >> same thing. it was the same stud yishtion fed study. >> you would have had to be pretty smart to -- >> you would have had to really understand the system. you can see as the book goes by they learn how things interest financed during the middle of the crisis. that, by the way, was one of the most amazing things to me throughout the crisis was that they're just learning about auction rate securities when i'm just learning about it. and i thought, they're the treasury, they're the fed. they're supposed to know about these things! and they didn't. >> there were probably risk officers at goldman that knew and probably lehman that were shut out of the most important conversations. you read forman's book. >> speaking of which, author of "too big to fail" the story of how twa fought to save the
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system. >> i stayed up last night to finish the book. >> anything surprising or things that don't square with your own reporting? >> no. actual lishtion i had to say they were quite complimentary and i have to say he did a terrific job with it. i thought the issue i was most focused on was how he was going to address the lehman weekend going in and coming out and the language he used around that friday where he effectively tried to tell the public market actually through steve liesman that there would be no bailout and how effectively he was trying to in some ways play chicken with the bankers. >> andrew, hold on, because the sot right here. i prepared it for you because i knew you would interested. i have a cameo in this as do i in andrew's book is that they call me on the friday before and say according to a person this familiar with paulson's thinking there will be no public money. i ask him, is that the strategy, is that what you planned to do, not put money in or is it a tactic? he answers it one way at the beginning and then answered it a different way at the end of this same conversation. let's listen.
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is it a tactic? >> that was a tactic. and i think what we -- >> so you were prepared to use government money? >> here's what we lay out in the book. first of all, i didn't have -- treasury didn't have government funds. we didn't have the t.a.r.p., okay, so treasury didn't have it. the fed, we can -- i believe that if there had been a situation where we had a buyer -- and, remember, we didn't have a buyer. but if we had had a situation where we had a buyer that could have done that, and so the fed wouldn't have had to lend into a -- to a run on the bank. and there was a way that the fed could have -- could have done something similar to bear stearns, we would have all talked about it very quickly and made a decision. and my judgment is we would have made the decision to do what we had done with bear stearns,
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because lehman -- the system was so fragile that i may not have known that the results were going to be as disastrous as they were. >> wow! >> interesting. >> that's frightening, though, that he would actually admit that that's a tactic. >> but andrew has an interesting point that he sent me. you think he played chicken and lost there. >> i think he played chicken and lost there. i take hank at his word. i believe that he believes that he would have done something had he had the vehicle, had barclays been there to do the deal. having said that, if he really did believe that -- and there's no mention of this in his book or mine. there is no moment where he says to the british regulators, whom he blames for not allowing this deal to happen, where he says to them, listen, if we did x, y and z and did it the way we did with jpmorgan would you help with this deal? >> i'm going to disagree a little bit.
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sounds a little when he calls up. we'll play that later. he said, it sounds to me like it's over, there's no sort of like -- it's just done. there's no, can we talk about this. no, no, we can't talk about this. there is no deal. >> there's no question. i think if you were on the other end of that phone call, which hank was, and he's hearing this, i think he was saying to himself there is no deal, there is no opportunity. and yet, given the stakes, you would have wished, i think, for him to at least put on the record at that moment, we would be willing to do x, y and z and he doesn't. >> can i ask you one other question? as i went through hank's book and your book, what was the ultimate size of the capital hold? when i was reporting it i heard $100 million or north of there. we know the consortium came up with the $30 billion? was that the hole, $30 billion that could have saved lehman? >> i think that would have done it. >> but they had the $30 billion
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from the private sector. >> exactly. here's the key. they needed the guarantee. between the time that they would have signed the deal and would have closed the deal. and that was what barclays was looking for the government to do and that's what the government never offered to do. >> andrew, talk about your thoughts in terms of paulson's book and the way it will place him in history. because obviously he's writing this for his legacy. there are still those, though, who say he helped defuse this bomb. he also helped create it by in some way lefrg up goldman in if years before. >> there are no question people will say he helped bring us to the brink. i give him enormous credit and i suspect history will much more fondly than now, you can blame him for all sorts of things going up until lehman. but when you think about the steps and the measures that they took aftertwardz, i think those were extraordinary. we will live with the consequences of those for the next 10, 20, 30 years and debate them. when you think where we could have been -- i know it's
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counter-factual -- we would have been in a worse place. >> i have to say having been with him in this and knowing him like i do, he's not worried about his legacy. certainly people write books and but the that in there. he wants this to be an education for the future, too. there is no book. as he was saying in the interview, there's no book you could go to and get off the shelf and say this is what we do in a crisis. in part what he's doing is giving a little bit of a road map and trying to give people ideas for the future how you handle a crisis with the magnitude that he was facing at that point. >> i think what's clear when you read this book is that this space between wall street and washington, really, there wasn't a train that ran between the two. and while they were doing it, they were laying the tracks and trying to see if the train would run. parts it didn't run and parts it did. and the whole thing was protect the overall economy and whether or not that ended up being the best course of action we haven't really played it out yet. >> of course not. but i think what hopefully he -- comes through in this is that he was very creative.
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he was the most creative person in the room. he had all of the options, i think, available that he could possibly consider, both for the president to consider and for those of us that were trying desperately to help him and help the president make a decision on this. he, i think, as part of this, is giving us a r50d map for the future. how to handle crisis. there's no perfect answer. we can all monday morning quarterback this and say he could have, should have, would have done this. he's even doing that. >> one quick political thing, which is that paulson comes off as very much being almost the closet democrat in this whole thing but has only the kindest words for president bush in this and how the president acted and really gave paulson the authority to do these things and covered his political backside on this. >> where does he come off as a closet democrat? >> his mother cries when he gets offered the treasury secretary job because she's -- >> she loved reagan. >> that was a bush thing. that wasn't a republican or democrat.
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>> no, no, no, she was -- >> no, no, but she's a democrat. and by the way, wendy, as well, his wife. >> wendy, his wife, also. >> then there's the bird watching and the conservation and everything else. >> you have to have a hobby. >> only republican birds. >> he certainly got a lot of criticism from the right for putting goldman -- >> andrew, good to see you again. welcome home. good to talk to andrew sorkin. we'll see you a lot more. steve in the next hour, more of his interview with hank paulson which will air all day. >> goldman, an interesting part. >> conservatives april rape the environment and love hydrocarbons and exxonmobil. this is a shock to you? >> we've got exxonmobil numbers on the clock. we'll bring them to you as soon as they're released. breaking news on consumer spending. national car rental? that's my choice.
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hank paulson "on the brink." >> that was one of the low points in my life. >> the former treasury secretary recounting the great financial disaster of our time. now he looks forward with "squawk box." you know, $500 billion, $700
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billion. they're both big numbers. people are going to gag when they hear either one. >> toyota's plan to fix that massive recall. >> we will reinforce the overall accelerator pedal with a precision-cut metal plate. >> how this pedal problem may let rivals speed ahead. jobs, jobs, jobs, but that's later this week. today it is breaking news on the consumer. "squawk box" begins right now. all right. take a look. you're going to see this is the unveiling, the official unveiling of the budget that we've been talking about. president obama sending congress a $3.38 trillion budget. the deficit expected to surge to a record breaking $1.65
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trillion. there's the book that lays out a $1.65 trillion deficit. we'll be talking about this all morning long. it's the news coming out of washington today. but this is the official unveiling. welcome back, this is "squawk box" on cnbc. becky quick along with carl quintanilla. our guest host, perfect to have on the budget unveiling. jim nussle formerly with the office of management and budget. also, a flood of economic data this week including the jobs report this friday. today, though, we get personal income and spending for december. those numbers come out in less than half an hour's time, 8:30 eastern time. we've watched the futures and it's picked up. futures up 58 points above fair value. >> close too the session highs. the president set to unveil that proposed budget for the 2011 fiscal year. highlights had spending totaling more than $3.8 trillion with
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discretionary to the tune of $1.4 trillion. the deficit for 2011 expected 20 hit $1.3 trillion. 8.3% of gdp. it projects $1.5 trillion. toyota announcing a fix. the automakers says dealers should get parts to fix the sticky gas pedal problem this week. toyota is also training service technicians on the repairs. toyota president jim lentz joined us earlier this morning. and we'll get to that sound a little bit later, if joe has exxon's earnings ready to go. i see that it is a $1.27 on net income of 6.05 billion dollars. naturally this, was logged -- i estimate on $1.27. >> the estimate was actually $1.19. so you're talking about a number up by eight cents above what the street was expecting if that's a clean number. we're just getting headlines at this point.
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the headline number $1.27 earnings per share. >> the $6.05 is net income. looking for $86 billion in revenue for exxon. at least the bottom line isn't a miss like chevron. in fact, the stock is immediately called higher on this. that actually, wow, is near the low end of the range. exxon up in the 70s and 80s and now back in the 60s, the low 62, the high up at 81 or so. still don't see a -- we'll get the -- we have to do upstream and downstream and all the different things that people get. you can look from that chart right there. almost -- that's when dollar started strengthening and commodities started pulling back. and actually when the market started getting a little weak. we worried about the way the
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dollar started strengthening. >> and we were right to worry. >> here's another number, cap spending 8.26 up 21% but, again, we're just getting headlines on this. >> and you look at production for exxon, too, how much they were placed in production. so far, you can see up almost a dollar now. >> here's the revenue. $89.8 billion versus the $86.1 billion the street was expecting. >> yeah. exxon, you remember the good old days when they earned over 100 -- over $10 billion. $10 billion. the days when we were calling for windfall. you specifically recall calling for the windfall profits. >> i think that was actually my proposal. >> fourth quarter u.s. upstream next $1.01 billion. >> i co-sponsored it with dennis kucinich. >> and bernie sanders. you're dealing with the other side the aisle. >> why don't you put a little
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"d" after my name on the screen. >> it sets up a good interplay. >> sort of a faux conflict. >> exactly. >> bec, are you going to do markets here? >> looking more international upstream of $4.7 billion. u.s. upstream, a net of $1.01 billion. >> international. -- u.s. downstream loss $287 million. there it is -- is that a crack thing, a crack spread problem? it was with chevron, right? >> yes, right >> yeah. i'm not asking you anything -- >> problem. >> we'll begin watching that again. that dow component up by 1.2% premarket and keep an eye on that. meantime kicking off the celebration of black history month with one of grio.com's historymakers in the making. management director at morgan stanley management investment. >> thanks for having me. >> we've been talking an awful
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lot about the markets and where things are headed and what's happening. this is interesting to kick off black history month. what does it mean to you? >> it's very important to me. i think had african-americans have made a very important contribution to this country and it's important that we recognize that and have a month to celebrate that i think is fitting and a big deal. i'm happy to be a part of it. >> thank you for joining us. tell us what you do at morgan stanley. >> in investment management and responsible for putting it together a emerging management platform. it's a new initiative for the form, a new one for the street and i'm quite excited about it p. >> you talk about new initiative for the street, too. this is not the type of thing we've seen in the past. >> what are the goals laid out? >> the goals will be to help emerging had managers accelerator their growth. there are particular challenges. one is having the proper operational and infrastructure platform and, two, having the right exposure to the right institutional and retail polls of had capital.
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we have the ability to help them and as i said and to accelerate their growth. >> how do you do that? one example. >> specifically exposing them to the right infrastructure and operational platforms. it's very difficult for a small firm to get the best in class back office and middle office tools that make them institutionally attractive to larger pools of institutional capital. if we had various strategic partnerships already that we can help the firms get access to in a way they might not be able to on their own because they are a small firm. with respect to the exposure to institutional capital, we have very strong institutional relationships can make an entree for some of the smaller firms to that capital and we obviously have one of the largest retail distribution platforms in the world. it's very ditch for a small firm to get access to those types of channels. we can partner with them to expose them to that. >> how do you find the emerging
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players? >> they've been out there for a long time. there are a number of ways to get exposed to them. now that they know we're doing this, a lot of them are making themselves available to us. number two, there are conferences that are specifically targeted towards emerging managers and we obviously have a presence at those conferences. a number of the emerging managers have been out there for a long time and we obviously know who some of them are and get exposure through other parts of our business to some of them on the broker/dealer side on our fund-to-fund side and the retail platform as well. we have a really good -- we have our finger on the pulse of where they are. >> what makes the best eve merging managers? what are the qualities that they have in common? >> first of all, outstanding performance. good performance with respect to whatever your asset class happens to be, whether it's long on the equity, fixed income, alternative. so good performance. and a track record of performance, call it three to five years. the other is obviously having a focus on what's important from a regulatory standpoint, from a legal standpoint, from a
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compliance standpoint. and, also, having a vision on what it means to build a team, because obviously there is one set of resources that are important if you have $100 million under management but then you need different resources if it's a billion dollars or two billion dollars and understanding and having that vision and understanding what it means to build the team is important. >> the difference of an entrepreneur and somebody running a company that is really developing and growing. >> you've seen that before, for example, in technology. what might make sense as a founder or you have a great idea, you may or may not be that person that can take it to the next level. you're absolutely right. >> you've been pretty constructive on stocks, right? >> yes, i have. >> has the recent action changed your mind? >> not at all. as you know i'm a long term bull and i continue to be a bull. i think there are a number of things that's happened the last 18 months that set us up for a good bull market. not telling you it will happen in the second quarter or the thart but long term i'm very constructive on this market. >> why is earnings season going so underappreciated.
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>> >> i think there is a lot of things the market expects with one to watch company performance but there's a lot of uncertainty with respect what's going to happen with respect to health care reform, what's going to happen with respect to financial services reform. as you know, whenever there is that type of uncertainty in the market, it always sets it up for a little bit of volatility. but if you think about what's transpired in the stimulus that's put in the market there is a multiplier effect i think we haven't seen yet. that's one of the reasons i'm constructive on the market. >> does it make you feel better to think there is gridlock coming to washington if there's concern about what washington is doing based on the massachusetts election? >> i have to tell you, i think we'll work our way through that. i think everybody is slowly but surely starting to focus on just the economy and just jobs and we will be aligned along that. and i think once we start to work that out, again, as i said, i think that will be the thing that will help us move forward. >> carl yashtion thank you very much for joining us. we hope you come back soon. >> thank you for having me.
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when we come back, a lot more of steve's interview with hank paulson. his new book on the brink being released today. we'll hear what he has to say about chairman bernanke and his successor tim geithner.
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the former treasury secretary hank paulson's new book "on the brink" hits the book stores today. our steve liesman talked to him. he opened up on some of the dark days surrounding specifically the fall of lehman but also talked to him about some of the personalities he had to work with and some who have come soon. >> interesting stuff. we'll have that in a different segment. right now, after more than a year of silence the treasury secretary published "on the brink," a wide ranging account of the events leading up to 2000 and the efforts to save the system and economy from collapse. we had a wide ranging interview we'll bring you throughout date. in the next segment we discuss the recent battle over the reapoirnlt of ben bernanke and the steps paulson thinks need to be taken to fix the financial system. >> i'm absolutely delighted he was confirmed.
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i wasn't worried about it. i knew he was going to be confirmed. i think that the president really got to it in the state of the union when he simply said something to the effect of, republicans didn't like the bailouts, democrats didn't like the bailout, i didn't like the bailout, but we needed to do it. and i -- so i think all of us that were here in the midst of the crisis had to do some very objectionable, politically unattractive things. but they were far, far better than the alternative, which would have been a meltdown of our economy and an absolute economic disaster. >> was it unfair for the senators to blame ben bernanke for everything that happened? >> it is -- it sort of goes with the territory. it's not about fairness or unfairness. if you're a leader and a strong leader during a difficult time like a crisis, it's -- there's
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going to -- there's always going to be a little bit of flack. and then those -- those who are in the top economic jobs when the economy isn't doing well, regardless of what hands they've been dealt, are always going to draw a certain amount of controversy. >> do you talk to tim geithner a lot? >> of course. of course. we worked closely when we were in government, so i talk with him. >> how do you think he's doing now? >> i think he's doing an excellent job. i think he's doing an excellent job. he's a very talented man. and the -- what i'm focusing on is what i know best, which is the programs that the administration has done to stabilize the system, which i think are very for the most part either continuations or logical
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extensions of things that we did when we were here. and i think he's -- i think he's -- he has a real challenge for the reason we've discussed. he it was here and played a significant role, which he should be very, very proud of, but played a significant role in doing some very unpopular things. >> what do we need to do from here to get the markets right? >> well, i think if we don't get two things done, we will have failed. there's two things i'm going to point out that we absolutely need to do in terms of regulatory reform. and the first one is the systemic regular lator. right now regulators are focused -- i describe it on the trees. but we need one regulator on the entire forest. so we need one regulator that's got the information so that they can monitor the markets and the
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power to intervene and restrain risk-taking activities or activities that could threaten the whole system when it's necessary. that's number one. then number two, as you heard me say earlier, we sure better have resolution authority. so that in the future no financial institution will be too big to fail. and any institution, regardless of its size or business model or whatever that can be liquidated and liquidated in a way in which it doesn't take down the financial system and the american economy. then we won't get ourselves back in the struggle. >> what do you do next? >> what i do next is something i have done all my life and really enjoy and think it's very important and that's work with my wife, wendy, on conservation initiatives. conservation and the environment. i've loved it, done it all my
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life, frankly. and in recent years have been very engaged in it. and i'd like to do that full-time. >> in the next hour, hank paulson comments on whether goldman sachs was really in jeopardy, whether he gave goldman's lloyd blankfein special treatment during the crisis and mistakes leading up to the lehman collapse and recounts some of the more heated conversations with politicians at the time like candidate john mccain. we have hank paulson all day and the financial crisis on cnbc and his book "on the brink." >> do you get the sense he held anything back? >> i was amazed how honest he was personally. he talked about having the dry heaves. he has this medical condition. obama was in the room, mccain in the room, all the democratic leadership. he says, i had too much diet coke, i have to go out for a second. this is a recurrent theme throughout the book and also talked about being scared which we talked in the last hour when he said what happened when
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everything collapsed, he said, i was scared. did i not know what to do. he collects himself, it comes back in and acts like he knows what to do. which i think jim nussle, he writes in the book. >> he was physically in pain. this is a guy who -- we were in the eval office meeting with the president, he couldn't sit down because he was having back spasms. i'm sure all of this was because of the stress and fatigue. he was definitely the most creative in the room and definitely i think had good ideas, good options but it was clearly a personal struggle during all of this. >> i guess probably more interesting is the few number of times he actually does lose it. he does lose it a couple of times and we'll talk about that. he just -- when darling calls up and says, we're not doing the deal on that sunday, he hangs up the phone and he goes down to the bankers and he goes, the british screwed us. and he says, he regrets having said that. you can imagine, he's got a deal, he's got a deal all weekend, it blows up and he's
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got nothing. after that, the british back out. the british government says barclays can't do it and he says the british screwed us. >> all right, steve. thanks. exxonmobil reported fourth quarter results minutes ago. reaction, jason gamble. the bottom line number, some interesting things. we looked through the numbers here, jason. this oil equivalent production increasing 2%. and if you exclude some of the stuff entitlement volumes or opec, it's 3%. is that okay year over year with production increase of 3%? >> even better than i expected. it was one percentage point higher than what i thought. what you're starting to see is the effect of the major projects ramping up. >> looking for the downstream loss. it's a lot of $189 million. but i like this number.
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it was down $2.6 billion from the previous -- they talk about lower margins drove the majority of the decline. that's the same thing chevron was talking about last week. >> and conoco phillips. the refining margin environment in the fourth quarter of 2009 s the worse i've seen in ten years. they did miss. but the chemical business which is tightly tied in with that is the primary reason that the earnings beat my estimate on the street. so you're starting to see a little turnaround with exxon's operations at least. >> how did it happen? walk us through what's happening at the refining, then how can chemicals be strong since it's kind of resulting from the same operations, no? >> well, that's our point. what we're really seeing downstream in general is that the overall economy is having big negative effects on the demand for refined product. unemployment in the u.s. is contributing through the demand for gasoline. so you have a period of very, very twaek demand for the re
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fined product and at the same time, there's a lot of incremental capacity coming online particularly in asia. you're getting squeezed from both supply and demand. in the case of chemicals, they are using the same feed stock but serve slightly different markets. exxon is the best able to slide between the chemical market and refined product market. that could be why they have got the big beat in chemicals this quarter. >> did the recent strength in the dollar create a buying opportunity for exxon down here at 64, 64 65? >> i think it's very interesting in a valuation standpoint, trading at a level of -- i think last out when oil was 45 bucks. i think the xto tranceation is kind of an overweight on the stock or overhanging on the stock now. movement in the dollar may not allow you to get the advantage over the next few weeks. as xto gets closed out it's looking interesting. >> we'll be using oil for a while and this is the one, i guess. jason, we've got to keep you short. appreciate your time this morning. see you later.
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coming up, the first of several big economic reports that will keep the markets very busy this week. plus toyota's damage control. phil lebeau with the details the pedal fix and the plan to restore toyota's reputation with customers.
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take a look at the dow futures up by about 59 points above fair value. part of what the dow has been helped out is exxonmobil.
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a dow component. up next personal income and spending. we will get the first of several really big data economic points for the market to take on today.
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it's a new month. that means new economic data. four different data points on jobs but this morning it's all about the consumer, personal income and spending. rick santelli at cme in chicago. steve liesman and our guest had host jim nussle here in studio. good morning. let's get some numbers. >> reporter: good morning, carl. the survey says, close to expectations, up 0.4 on income, spending up 0.2. both are within the shooting distance of expectations. revisions were both positive to 0.5 income. once again, if categorically traders around me were going to give you the best sampling for this type data, they'd rather
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see income moving higher than spending. maybe those at the administrative level of government would rather see both but spending of course key to the economy. year over year numbers on the deplater 2.1, a big jump from the last through. core pce month over month up 0.1. both of those no surprises. the dollar giving up a little ground but still doing pretty well the last several weeks. rates moving a bit higher as we learn this week what the february funding data will be and supplies always key on the first refundsing of the year. as we get a handle on not only what's coming down the pike for the 2011 budget but what may be in the rearview mirror with regard to the issues of last year's budget deficit. >> we'll talk about that a lot today, rick. stick around. reaction from steve liesman and our guest host jim nussle. first, steve, some internals. >> first of all, the november revision was 0.7 to 0.5, so more spending in november than we
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thought. the december spending coming in light, though. a tick lighter than what they expected at .2. put the two together and you come up with a savings rate of 4.8%, which is up from the 4.5%. i mention this because economists want to know given what the consumer has been through, the huge debts they took on, the efforts to get out of those debts and to save more, where the right level is for the savings rate. we thought maybe it was 4.5%, maybe up to 4.8, maybe more like 5%. that will bear some watching. we'll look at if the wages and salary we don't have the internal data. a little better on spending in november, worse in december. >> disposable income hanging in there, 0.3, good or bad? >> that's good. the consumer has had, in my opinion, a wherewithal we wouldn't have expected. we would have thought they'd go around. but doing the had 0.3, 0.2, average the two together, 0.7
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it's not that bad from where it could be. >> it is better than i think anyone expected. the other part is it's probably logical. i mean, people are just hanging on to some cash more than they normally would. that's probably a good thing. >> rick, your take on the budget situation this morning. >> reporter: well, i think that there's nothing easy about the red ink that's in front of us. and the notion that government has to be a deficit spending unit to prime the pump is always a great keynesian experiment. but to many, we've done it, we've been there and the success is hard to pin down. i think this is going to be a very big battle politically ahead and i think it will be a big deal for the marketplace as they grapple with how sovereigns like greece will deal with their issues and how much world supply there's going to be for nonfiscal restraint. >> where do you think -- trying to stick to what is politically feasible right now, rick, what
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would have been a logical next step beyond the freeze the president has already announced? >> reporter: i think real spending cuts. in the end, there doesn't seem to be a notion that we can get spending under control, especially when we still have unemployment where we have it. so it's going to be a political hot potato, i think, trying to of course address jobs, with the notion that we've already wasted so much money, according to some, that doing it again just doesn't make sense either. it's going to be a very, very difficult time ahead. >> jim nussle, can we do a little bit of a reality check? the president tried to do this in the state of the union. i'm interested in your opinion here. some of what president obama has right now in terms of his budget situation are a result of actions he took. some are actions that were basically handed to him. how do you say, okay, this it was his fault, this was not his fault, and some of the things that he's been saddled with in terms of the deficits? i also think it's interesting to think if a republican
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administration had been in office there would have been deficit spending anyway, probably through tax cuts more than through spending but would have been deficit spending, right? >> the blame game will go on no matter who is in office. that part is probably irrelevant. i don't really care who is at fault. i think we ought to just take responsibility for it. i want to see -- i think when the president went to the republican retreat and had that first ever conversation between the two, they both started taking some responsibility. that's what we need. but that's what you need. his willingness to say, all right, fine, we got here, you got us here, i got us here, doesn't matter. what are we going to do about it? >> i kind of disagree. i think it matters to the extent if obama came in and between him and the democratic congress, if they start spending like drunken sailors, that's where we've got to put a lid on it. but you look at revenue numbers, revenue has really fallen through the floor. so that's not something he has any control over. >> but the conversation never starts back just one year. they have to go back and they say, yeah, but three years ago,
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you did this to me and six years ago you did that. who really cares? they all have this conversation about the first deck aftd 21st century even forget about the act of terrorism and what that blew into the economy. there was a recession when president bush took office. there were a lot of things that go on that people conveniently forget but it doesn't matter. the point is what do you do next year and the year after and from this point forward? i agree with rick. i don't think a president is going to be enough. but good luck getting that freeze through this congress. i think that's going to be very interesting to watch the democrats in particular and how they react to the president's freeze that he's proposing on only 17% of the budget. >> maybe if only nixon could get to the china, only obama get the deficit under control, the exact opposite of what everybody thinks. >> if we have trouble getting that done, good luck. >> you'll have trouble. it's not going to be easy getting this freeze through especially in an election year. politicians like to go home and take credit for things, things they spent money on.
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it's going to be tough to say we froze spending. jim will be here for the rest of the hour. >> toyota is rolling out its fix for millions of recalled vehicles that include some of the nation's most popular models. the japanese automaker taking out full-page ads yesterday in the newspapers characterizing its halt in sales in production as a temporary pause which will allow it to put customers first. phil has been reporting all morning on this. your interview looked like you were in davos, back with becky, sure. you are indeed in new york today. >> i am over at 30 rock. we were talking with jim lentz earlier this morning. this is the beginning of toyota saying we know there's a problem, we've known there is a problem. now here's what we're doing to win back customers to repair the vehicles on the road. really, this is going to take many, many weeks, many months. but jim lentz, the head of toyota usa believes they've found the problem and solution to what's p wrong with the accelerator pedals in some of their vehicles. >> we're very confident.
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between the first recall that we've had on the entrapment of the pedal and now this on the overall pedal, i think we have it. >> toyota is going to start shipping the repair parts for these pedals going to dealerships around the country this week. the dealerships will be staying open extended hours in some cases 24/7 to fix the pedals as they're brought in from existing models that have been sold to customers. toyota is not sure when they're going to resume the sales of those vehicles that they suspended last week. that will happen as each individual model is repaired. so it's not as if they're going to say, hey, on wednesday we'll start selling these vehicles again. it's how quickly they get the models repaired. toyota sales the scales of lexus and scion brands that have not been impacted by the sticking pedal issue have not suffered so far and lentz believes toyota will suffer minimal damage when it comes to sales. >> are we embarrassed by this? of course we are. are we sorry that this happened to our customers to cause them this concern?
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of course we are. but i think how well we take care of customers in the dealership, how quickly we can get this done, i think will determine just how much loss of confidence our customers have in us. >> we certainly know that investors have lost faith in toyota shares. that stock was down 12% last week. one day last week it dropped more than 10%. look at that stock. that's the last month for toyota. and it's certainly been falling within the last two weeks. it will be interesting to see what happens with those shares today. guys, this is the beginning of a full-court press by toyota executives to win back the confidence of car buyers in north america. easier said than done because you're looking at two recalls covering more than 7 million vehicles worldwide over the last three months. there is going to be an element of the population that will say, prove it to me, that this in fact will fix any problems that are out there with the gas pedals. guys, that's the latest. back to you.
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>> all right, phil, thanks. we're going to move on and talk more about the budget. the white house about to release its budgets for 2011. will it fly in the senate? senator judd gregg will tell us if it will have a chance on the hill. we'll take a break and get to that.
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the cost of medicare,
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medicaid and social security will continue to skyrocket. that's why i've called for a bipartisan fiscal commission modeling on a proposal by republican judd gregg and democrat ken conrad. >> and you heard it. that's the president, obama, he gave our next guest a shout-out during the state of the union but party lines are drawn as republicans await to see the details of the president's 2011 budget. joining us judd gregg. you were sitting there going, joe, it's not true. >> i'm not in that branch of the government actually. >> oh, that it wasn't you. >> although he could be. >> judd, $3.8 trillion, $1.6 trillion shortfall. was there really anything discretionary that you could do about it this year? i mean, this -- >> yes. yes, there is. >> there is? what in. >> well, i believe genuinely
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that you have to step up on the spending side ledger. i think it was einstein who said that the definition of insanity is doing the wrong thing over and over again and expecting change. the wrong thing is basically growing the government, spending a lot of money and adding to the debt. we have to change that. my suggestion would be that instead of doing this health care bill in its present form, that you go back to the health care bill and take a look at some of the elements of it. in that bill there was $500 billion of reduction in medicare spending, which was used to fund new entitlements. in other words, used to grow the government. instead of doing that, why don't we take that $500 billion and put it into a medicare insurance or rescue fund so that we use it to basically make medicare more solvent. that it would immediately adjust the deficit by significant numbers over the next ten years. in addition, this freeze should be a hard freeze and it should apply, in my opinion, not only to the nondefense discretionary starting in 2011. it should start today. and you ought to also probably
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reduce it by the amount of earmarks. do a freeze less earmarks. there are things that can be done that are real. and if we don't start doing things that are real, we're going to get ourselves into deep, deep trouble here and we're going to continue to pursue this course of fiscal insanity in my opinion. >> in the real world, who is going to vote for any of these things? would you have to wait until november to do that? >> no. you should do it now. i mean, i think the american people have caught up with this. that's what massachusetts, i think, was about. the american people are really worried and concerned. and what they're most worried about, i believe, is that the government has grown so much and our debt has gotten so large that we're passing on to our children our country what we can't afford and give our children a less prosperous country than we received, which is unacceptable. unacceptable to all americans because that's not the american dream. you pass a better nation on to your kids, not a nation that has less prosperity. i think the american people are ready for us to step up and do aggressive and difficult things in the area of restrained spending because they get it.
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almost every american in this recession has been through some belt-tightening in their home. yet they look at the government and watch it being prof ligate. it's not this year, which is the stimulus. it's next year, the year after, the year after. eight years out, the president is projecting a trillion dollars had deficit. trillion dollars a year over the next eight years. that's not acceptable. you can't do that to this country because you're basically taking us down the road of insolvency. we're going to be like a south american banana republic. >> would you even try to sell politically a freeze on military spending? putting a hold on the pentagon? >> well, you know, the first obligation of a nation is to defend itself. and we have armies in the field. so we have to do whatever we need to do in order to make sure they have the support they need. reorganizing in defense spending, absolutely. there are some weapons systems that are strategic in nature that we should pass up buying right now.
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we can probably tighten our belts on the defense side. but in the end, if you've got armies in the field you have to spend whatever it takes to make sure those troops have the support they need. >> jim nussle here. i can't help but look at the numbers and realize that for one of the first times in history, congress shows up to work for this year and because of all of the money that we send in in tax dollars is already spent on the mandatory programs, the $1.45 trillion the president wants to spend on discretionary spending is all going to need to be borrowed, every single penny of what you and my former colleagues had to do over the next year basically has to be borrowed. what's that going to do to the congress this year as you consider some of the big issues ahead of you? >> that's not only true, jim, but we have to borrow the money to pay the interest. can you imagine that? we're borrowing to pay our interest payments. if that's not the definition of
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insolvency, i don't know what is. it should put a lot of pressure on us to be much more disciplined in our spending. i heard one of the guests -- might have been steve liesman actually say this is both a tax and a spend issue. if you look at the numbers, that really isn't true. cbo is saying that tax revenues will get up to about 20% of gdp, which will be above the historic norm of about 18%. but what they're also saying is that spending will go from 20% of gdp, which is the historic norm, up to 20 -- it is at 2 25% now. then up to 30% of gdp. this truly is a spending issue. the government is simply being grown too fast and in a way that we cannot afford. and that's because, whether you like it or not, we're functioning with a congress that genuinely believes that if you grow the government dramatically, you create prosperity. i fundamentally disagrees. you could not create prosperity buy growing the government faster than economy can afford
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it. but give incentive for people to take risks and invest and create jobs. we've got to change our attitude around here or else we're going to basically put so much debt on the books that we can't catch our tail. >> so if twaer really serious about this, why isn't taxing part of the solution? >> well, actually, there's $2 trillion of taxes in the president's proposal, $2 trillion. so the point is the tax revenues are going to get to a level that is way above what we've historically taken in as a nation. cbo projects it to be around 20%. the problem isn't that we're not raising enough in revenue. the problem is that we're spending so much more than we historically spend and are spending much more than we can afford. >> yeah. and then you saw the big pivot to jobs now, judd. and i tried to count up how many different businesses that have been kind of assaulted or at least perceived tov assaulted and then i think, jocks, businesses. jobs, businesses. it seems impossible to talk out
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of one side of your mouth about jobs and the other side of your mouth when you bashed the travel industry, the banking industry, the oil and gas industry. you go right down the line. health care industry. health insurance vilified. what jobs are left or what industries are left to create the job? >> well, you got an excellent point, joe. when you're trying to replicate a european form of government where the government government and essentially manages the economy at all sorts of levels and basically you have massive over regulation and basically nationalization of certain industries like the student loan industry and then you say, well, but you want the entrepreneurs to go out and take risk and create jobs and capital. well, entrepreneurs don't react that way, you know? when they see uncertainty in the market place as to whether they'll get a return on their investment because they're afraid the government is going to come in and basically take most of their invest. through either tax or regulatory policy they don't take the risk and they don't make the capital investment. that's just simple economics and
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simple common sense. if you have a government in place that basically has an inherited antipathy toward the market and capitalism and i believe this government does -- i wish it weren't true but this is a government of community organizers who believe in social justice. >> green renewable. >> this is a government you almost joined as commerce secretary. >> yeah, well, we all make mistakes and that was certainly one of mine. >> renewable green energy is okay i think. 100% of the jobs have to come from that. >> green energy is fine but let's also talk nuclear energy and i think the president is starting to do that. >> yeah. >> let's talk about creating energy and using energy supply which is american made such as natural gas. >> senator, you have to go as a partner with business and not an adversary if you're really serious about jobs. i told you you were on today. i didn't know if you'd show up or if it would be tomorrow. get your calendar right would you? >> thank you for the advice.
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>> thanks. always a pleasure. coming up big oil kicks off february stocks to watch. 
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you've seen the futures
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perhaps, looking pretty good. exxon is helping. $1.27 unlike chevron last week above $1.19 estimate and revenue was also nicely above an 89.8 billion versus an estimate of about 84 and that stock is going to trade up. downstream was tough, lost money overall and a oil production increased about 2% from a year ago. chemicals also a bright spot which we tried to figure out because it's, you know, kind of like a -- it's almost a downstream operation but not really. it's really the -- >> demand. >> the demand for that is better than for the finished products. >> we heard that from dow chemical last week, too, starting to see a turn around. >> yeah, in davos. >> that's it. >> he's yelling. already did too much. >> all right. when we come back parting shots of the new budget plan with our guest host. first, though, check out gold which has come off quite a bit as you well know, back below
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1100 though it is up $3.20 today.
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thank god we have that music
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because, jim, the issues facing the country are so depressing you almost need to listen to that just to forget a second. >> doesn't it pick up your day? >> we love it. thanks for coming in today. given all the challenges that we have talked about with the budget and so forth, how do you think this is going to end at least in the near term? >> the discussion about -- and i think liesman said it -- nixon going to china. the president is going to have to enforce what little deficit reduction he has in his plan with the congress. he's going to have to exercise the veto. he's going to have to hold these top line numbers. he's going to have to be tough on not only the money that he's trying to reduce, the programs he's trying to consolidate, but he can't let them, you know, continue to expand earmarks. these are things that are pretty basic but have to be done. >> if he's serious about being an effective one termer, if you prefer to do that than be an ineffective two termer maybe this is the opportunity to put that into practice.
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>> he also demonstrated that he is willing to go to the republicans and talk to them about some issues. they're going to be with him. they're going to be allies when it comes to enforcing tough budgets. they want to be able to do that. i think he has some partners if he wants to reach out to them and try and get this thing under control. >> we'll see how it shapes up, jim. always good to talk with you. thanks for coming in. >> good to be with you. >> join us tomorrow. "squawk on the street" is next. breaking news. we're covering the markets from the nyse. futures higher and the release of the federal budget in washington right now. >> and john harwood is at the white house with full details. we begin though with hampton pearson with literally, hamp, what is a very big, long book. >> you've got that right, erin. we are at ground zero for the budget release. the government printing office. it'll be released in about an hour but now the doors will open here for basically
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presubscribers to get early copies on an embargoed basis. this is the budget, itself. runs about 180 pages. this is the appendix where all the numbers are. it runs over 1400 pages. and the gpo is really state-of-the-art in terms of technology. in about an hour if you are in luck you can download the budget on a kindle, the sony reader device, the barnes & noble knook. itas maizing. again, this particular budget runs something like 2400 pages with all four volumes, weighs about ten pounds. there are something like 31,000 advance orders for this so, again, gpo for a while anyway is kind of the amazon.com of the government printing and publishing distribution. now to john harwood with some of the facts of what's inside all of these much awaited documents. john? >> reporter: well, guys, we've got a

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